When you begin to consider expanding your market potential via exporting your goods or services, there is a plethora of information you might need to be aware of before you jump into any form of international trade. Mastering the knowledgebase for exportation can be a daunting task for many organisations (small, medium and large organisations), especially if there isn’t a professional in the export business on board to guide your plans through the seas of international trade.
The good news is that in most cases, your plans to get involved with international trade will come with a simplified and straightforward business strategy. With that said, here are some tips to keep in mind, which can be useful when developing a business strategy for international trade.
1. Administer due diligence on your paperwork.
Firstly, you should always have a legally binding contract for both parties involved in any of your overseas transactions, so you should plan carefully ahead, preferably working with a legal professional, before you begin communicating with a foreign market.
Examples of situations where documentation might be useful or at times, necessary include:
A. Payment Terms
What are your prefered terms of payment? More specifically, would you be offering open credit to your customers or would you prefer full payment upfront? Whatever the case may be, get it properly documented and agreed on by you and all other parties involved in your transactions.
B. Customs Clearance and Tax documents
When you send goods to another country through a port or a shipping agency, documents are always needed to get your products cleared by customs. Ensuring that you have the right records for your goods would prevent any delays which may cause alterations to your delivery schedule and consequently, unhappy customers.
2. Currency Considerations
Pay attention to the currency you choose when selling your products. Would you sell your products in Naira or the US dollar, or would prefer to deal with your customers in their local currency?
Making a trade in your customers’ local currency would be a much more convenient option for your customers, but you would have to consider if this currency is stable regarding exchange rates. The stability of any money you decide to make a trade in would make a significant impact on your earnings.
3. Formal Payment Mechanisms
A structured payment mechanism would be an intermediary between you, the seller and your customer, the buyer. When you choose a formalised payment procedure, all payments made during an exchange of goods or services, are made through a bank.
This added layer of security not only gives your potential customers peace of mind but can be of real importance when exporting to a market that might be considered to be high risk. An example of a formal payment mechanism is a letter of credit often provided by banks.
4. Insurance
Protecting your investment with insurance provides a safety buffer for you to operate within. You can get insurance for your products if they are physical goods to be transported via cargo, and you can also protect your finances with insurance.
When transporting physical goods, always remember to ask your carrier or shipping agent, if your assets have cargo insurance while in transit. A credit insurance agency can help with protecting your export finances through their various risk bearing products.
The Nigeria Export-Import Bank, NEXIM Bank, is a great place to start when looking for products related to export finance. Visit NEXIM Bank by following the link below:
5. Find a good freight forwarder
You should not only search for a good freight forwarder that would suit your business needs, but you should also endeavour to build a relationship with them. A freight forwarder would play a key role in your international trade plans so it might be a great idea to have a close relationship with at least one who can understand your every need.
6. Understand your distribution channels
This tip applies to exporters of physical goods. When delivering your products to a customer, in most cases, they pass through many channels before ending up at a final destination. For this reason, it is a good idea to understand to what extent your involvement in the distribution chain might be.
The international chamber of commerce developed some internationally recognised terms know as incoterms to help all parties involved in a trade to understand each other’s roles and responsibilities along the distribution chain.
Incoterms clearly define who pays for what part of transporting goods and also who bears the risks at what part of the transportation.
Visit the International Chamber of Commerce for more on Incoterms by following the link:
https://iccwbo.org
7. Know your tariff codes
Tariff codes are used by customs agents to classify goods being imported to their country so they can process import duties on goods quicker. Tariff codes also indicate which products might require an export licence before leaving a point of origin.
Tariff codes can vary by country, but there is a system that sorts these codes into a more globally recognised format known as the Harmonised System.
The World Customs Organisation maintains the Harmonised System. Tariff codes based on the Harmonised System exist for almost every product involved in international trade.
8. Regulatory and Legal Obligations
International law usually differs from your local laws. It is a good idea to get up to speed with the regulations of the land you choose to do business. Doing this would certainly help you avoid any unforeseen costs or added expenses due to a law or regulation that you might not have been aware of before initiating a trade.